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    WBD
    Earnings call· Jun 2025(Q2 FY25)

    Warner Bros. Discovery Q2 FY25 earnings call WBD

    Aug 7, 2025 Source

    Executive summary

    Warner Bros. Discovery Q2 FY25 — Strong Studio and Streaming Momentum

    Warner Bros. Discovery reported a strong Q2 FY25, driven by significant subscriber growth for HBO Max and robust performance from its Studios business. The company is on track to meet its adjusted EBITDA targets for both segments and has substantially delevered its balance sheet, positioning itself for the planned separation into two independent entities in 2026. Management emphasized content quality, strategic IP monetization, and global expansion as key drivers, while acknowledging near-term revenue dampening from a distribution deal restructuring.

    Highlights

    5

    • HBO Max added over 3.4 million subscribers in Q2 FY25, continuing global expansion.

    • Studios business on track to deliver at least $2.4 billion in adjusted EBITDA in 2025, targeting $3 billion.

    • Streaming business on track to exceed $1.3 billion in adjusted EBITDA in 2025 and reach over 150 million subscribers by end of 2026.

    • Net leverage reduced to 3.3x, the lowest since the merger.

    • Warner Bros. became the first studio to open 5 consecutive films with over $45 million in domestic box office.

    Concerns

    3

    • Restructuring of a legacy HBO Max U.S. distribution deal will dampen revenue growth rates for the second half of 2025.

    • NBA deal expiration will result in some offsetting revenue losses from an EBITDA perspective in 2026, despite cost savings.

    • Digital ad sales experiencing some price pressure, though strong premium maintained.

    Guidance & targets

    8
    CategoryTargetConfidence
    Studios Business Adjusted EBITDA
    at least $2.4 billion
    high materiality
    High
    Studios Business Adjusted EBITDA Goal
    $3 billion
    high materiality
    Medium
    Streaming Business Adjusted EBITDA
    exceed $1.3 billion
    high materiality
    High
    Streaming Subscribers
    over 150 million
    high materiality
    High
    NBA Deal Sports Cost Benefit
    roughly $100 million
    medium materiality
    High
    NBA Deal Net Benefit
    hundreds of millions of dollars
    high materiality
    High
    HBO Max Global Revenue Reacceleration
    reaccelerate
    medium materiality
    Medium
    HBO Max U.S. Revenue Growth Reacceleration
    reaccelerate
    medium materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Studios business
    On track to deliver at least $2.4 billion in adjusted EBITDA in 2025, with a long-term goal of $3 billion. This reflects a 3-year investment in creative and operational capabilities, leading to strong performance in film and TV.
    Adjusted EBITDA 2025 Target: $3 billion
    		———at least $2.4 billion
    Streaming business (HBO Max)
    Transformed HBO Max is on track to exceed $1.3 billion in adjusted EBITDA in 2025 and reach over 150 million subscribers by the end of 2026, driven by global launches and quality content.
    Subscribers added Q2 FY25: 3.4 millionSubscribers by end of 2026: over 150 million
    		———exceed $1.3 billion

    Operational metrics

    7
    Net Leverage Ratio
    3.3xlowest since merger closed
    Q2 FY25

    Significant deleveraging since the merger.

    Intercompany Content Value
    10-digit figure
    Past 3 years

    Value of intercompany profits parked on the balance sheet due to shift from external to internal content sales, expected to flow into P&L over next few years.

    Networks Content Sales
    $580 millionabove normalized run rate
    2H 2024

    Unusually high content licensing numbers in 2H 2024, compared to a normalized run rate of roughly $200 million per quarter.

    IP Monetization Ratio (vs. Disney)
    $0.30up from $0.22 three years ago
    Current

    Reflects increased effectiveness in circulating IP through the system.

    Account Sharing Crackdown Progress
    first inning
    Current

    Data sets are ready, aggressive messaging to start soon.

    Churn Reduction from Bundles
    cut in half, if not greater
    Current

    Bundling with other streamers has shown significant churn reduction and LTV expansion.

    Upfront Advertising Prices
    up
    Current

    Prices up across all categories, more so in sports than general entertainment. Digital side has some price pressure but maintained strong premium.

    Industry KPIs

    3
    MetricValueDetails
    Paid members subscribers3.4 millionsubscribers
    Member quality and retentioncut in half, if not greater%
    Content spend title performance5 consecutive filmsfilms

    Product announcements

    6
    ProductTypeDetails
    The Pittupdate
    Harry Potter TV Seriesmilestone
    Lord of the Rings Filmroadmap
    Weapons (New Line Cinema film)launch
    Cat in the Hat (Animation)launch
    Wizard of Oz in the Spherelaunch

    Deals & partnerships

    1
    DisneyBundling of streaming services

    Successful bundling relationship in the U.S., with active conversations for similar partnerships in international markets.

    Risks & headwinds

    4
    Legacy HBO Max U.S. distribution deal restructuringSecond half of 2025

    Dampen revenue growth rates

    Mitigation: Expected reacceleration globally in Q1 2026 and in the U.S. in 2H 2026 as the company laps the reset and launches in new international markets.

    NBA contract expiration offsetting revenue losses2026

    Some offsetting revenue losses from an EBITDA perspective

    Mitigation: Net benefit of hundreds of millions of dollars from rights cost savings, with some savings reinvested into other sports rights (e.g., college football playoffs, Big 12).

    Digital ad sales price pressureCurrent

    Some price pressure

    Mitigation: Maintaining a very strong price premium for the quality of inventory.

    Secular challenges in Global NetworksOngoing

    null

    Mitigation: Reimagining the U.S. Networks portfolio as a content engine, focusing on unscripted brands, and leveraging international free-to-air footprint with different secular trends. Building a team with a track record of fighting to win.

    What to watch in Q3 FY25

    5

    HBO Max U.S. Revenue Growth

    2H FY26
    CurrentDampened
    TargetReacceleration

    Why it matters

    Indicates recovery from distribution deal restructuring and impact on overall streaming revenue.

    The reacceleration drivers are going to be starting in the first half '25, obviously big new international launches coming from Europe. So on a global basis, we'll start to see revenue reaccelerate in the first half and really in the first quarter of '26 and then the U.S. growth will reaccelerate starting in the second half of '26 as we lap that reset.

    Q&A highlights

    5

    Will WBD be more open to licensing content to third parties for Warner Bros. and HBO, and will Discovery Global sub-license sports rights?

    David Zaslav stated they've significantly reduced external licensing to differentiate HBO Max, prioritizing long-term growth over short-term revenue, noting a '10-digit figure' of intercompany profits. Gunnar Wiedenfels confirmed sublicensing sports rights is unlikely, as they are developing a direct-to-consumer approach for streaming rights.

    “It is important to understand that we have very significantly shifted the mix between external and internal content sales over the past 3 years. And that has sort of put pressure on our near-term financial results, but we have put a 10-digit figure of value in terms of intercompany profits parked on the balance sheet.”

    asked by Robert Fishman · answered by Gunnar Wiedenfels

    3 min read7 chapters

    Detailed Narrative

    01

    Creative Momentum Across Studios

    Warner Bros. achieved a record of 5 consecutive films opening with over $45 million domestically, and Warner Bros. TV led Emmy nominations. The success of 'Superman' marks a new era for DC Studios, with James Gunn already working on the next installment. This creative resurgence is attributed to a 3-year investment in studio capabilities, positioning the company for continued success in film and television production.

    02

    Strategic Content Licensing Shift

    The company has significantly shifted its content licensing strategy over the past three years, opting to sell less content externally to differentiate HBO Max. This strategic decision has resulted in a '10-digit figure of value' in intercompany profits parked on the balance sheet, which is expected to flow into the P&L over the next few years as the content is utilized on the HBO Max platform. This prioritizes long-term platform growth over near-term external licensing revenue.

    03

    Global Networks and Sports Strategy

    The future Discovery Global entity will focus on reimagining the U.S. Networks portfolio as a content engine built around strong unscripted brands, and maintaining an important sports strategy. While sublicensing sports rights is deemed unlikely, the company is developing a direct-to-consumer go-to-market approach for its streaming sports rights, with potential for bundling with HBO Max, Discovery Plus, or third parties to maximize content availability.

    04

    IP Monetization and Theme Parks

    Warner Bros. Discovery sees significant untapped value in its intellectual property, having increased its monetization effectiveness from $0.22 to $0.30 for every dollar Disney makes. Efforts are underway to strategically deploy assets like Harry Potter (expanding Leavesden, Japan, Saudi Arabia) and DC (reclaiming rights from Six Flags) in theme parks and live events. The strategy involves licensing or partial ownership rather than building parks directly, aiming for compelling and lucrative deployments.

    05

    HBO Max Distribution Deal Restructuring

    A legacy U.S. distribution deal with a former affiliated party has been restructured, leading to an adjustment of rates. This change is expected to dampen revenue growth for HBO Max in the second half of 2025. However, revenue reacceleration is anticipated globally in Q1 2026, driven by new international launches in Europe, and specifically in the U.S. in 2H 2026 as the company laps the reset of this deal.

    06

    Account Sharing Crackdown & Churn Reduction

    The company is in the 'first inning' of its account sharing crackdown, with more aggressive messaging around legitimate users set to begin in September 2025. Real benefits from this initiative are expected to materialize in Q4 2025 and throughout 2026. Concurrently, churn reduction strategies include successful bundling partnerships, which have shown to cut churn by half or more, alongside efforts to improve content consistency, programming schedules, and product personalization.

    07

    Upfront Advertising Market Performance

    Despite initial concerns regarding the macroeconomic and geopolitical environment, the upfront advertising market performed well. Prices were up across all categories, with sports showing stronger gains than general entertainment. While the digital ad sales segment experienced some price pressure, the company maintained a strong price premium for its quality inventory. The company plans to continue going to market as a combined entity for ad sales post-separation to preserve synergy.

    AI-generated summary of the company’s earnings call. Not investment advice.